Corn bulls retreat as near-record costs curb demand

Corn bulls are retreating after the U.S. government said that the worst drought since 1956 will damage the crop less than analysts had expected and on speculation that near-record prices will curb demand.

Twelve of 28 analysts surveyed by Bloomberg said they expect prices to fall next week. Eleven were bullish and five were neutral. Bears outnumber bulls for the first time since April. Corn has lost 2.3 percent this week, heading for the biggest decline since June. Open interest, or outstanding futures contracts, on the Chicago Board of Trade contracted 6.3 percent in the past three weeks.

Prices are retreating after jumping as much as 68 percent in about two months, reaching a record $8.49 a bushel on Aug. 10. The U.S. Department of Agriculture said Sept. 12 global demand will drop 0.9 percent in the 2012-2013 marketing year, the first decline in 17 years. While the agency said U.S. farmers will collect the smallest crop in six years, the estimates for both production and stockpiles were greater than the average prediction in a Bloomberg survey of as many as 35 analysts.

“Demand is at risk,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen who has traded raw materials for more than a decade. “With supply now more or less known, the driver in the month ahead will be the demand response to the high prices.”

Global corn consumption will drop to 856.7 million metric tons in the year starting Oct. 1, from 864.7 million tons a year earlier, the USDA estimates. Livestock farmers will use 0.6 percent less corn in feed for animals than estimated in August, leaving worldwide ending stocks 0.5 percent higher than previously forecast at 123.9 million tons.

U.S. export sales for delivery before Aug. 31 slumped 30 percent to 10.032 million tons as of Sept. 6, the smallest for that period since 2005, according to USDA data compiled by Bloomberg. The USDA lowered its estimate for U.S. exports by 3.8 percent from a month earlier to 31.75 million tons, down 19 percent from a year earlier.

U.S. Midwest temperatures and precipitation in June and July were the hottest and driest since 1936, according to Commodity Weather Group LLC in Bethesda, Maryland. The biggest U.S. corn-growing states are Iowa, Illinois and Nebraska.